It’s finally paid off. For those of you who thought going to school in Norway and subsequently getting a second major in Norwegian and Norwegian Literature was perhaps a waste of a good education—ha ha ha, I laugh in your face. Not only did I get to spend over a year among the world’s most beautiful women, playing hockey all over Scandinavia and Russia, but I also learned a second language that only a handful of people outside of Norway speak. Fast forward a few (ahem!) years, and suddenly a study on music purchasing habits by those who download music illegally surfaces, untranslated, from all places, Norway. This, coupled with the news of the sentencing of The Pirate Bay founders out of Sweden (I can also read Swedish—they are quite similar), and the previously noted Swedish P2P study and I suddenly hit the education jackpot. We’ve got multiple studies coming out in languages that I understand, on topics I’m involved with and the timing seems rather good too. Beat that Econ majors!
Technically, you can get a roughly translated copy of the story, titled: Pirates Are The Best Customers through Google and Ars Technica. I’ve read this study, and I’ve also read numerous stories in the Norwegian press summarizing the results. The point that the study makes, and you can read it for yourself—don’t just take my word for it—is that people who illegally download music buy ten times more music than your average law-abiding music consumer. Although it never clearly states it as a conclusion, we are led to believe that illegal downloading is not what is causing the demise of the record industry. The study is a poll of over 1000 Norwegians ages 15-20. Add that to the Swedish study from a couple of days before (see previous post), and you’d actually think that music sales have seen steady increases over the past few years. So, if the billions of tracks that are downloaded on almost a daily basis via various illegal sites are done so by big-buck spending music fans, why aren’t these super-stealers-slash-super-consumers also fueling a music industry boom? Is there something that the record industry executives are not telling us? Are they really flying commercially (instead of the Gulfstream) as a ruse to keep us in the dark about their record profits? Holy crap, are we uncovering the next Madoff scam? Is this Enronesque? Where’s my Pulitzer?
Nope. The answer is really quite simple. Illegal downloading really does hurt overall music sales quite significantly–especially when overall consumption is down. Digital music is about buying one song at a time. Obviously, this is where the biggest dent in overall music sales has occurred. Overall music sales are at roughly 25% of what they were 10 years ago. Even if it’s totally accurate that music pirates are buying ten times more music than non-pirates, the overall purchase number is so much lower due to such drastically reduced consumption, that the stolen music, is actually having a bigger impact. Consider it this way. You’re a baker and make some really kick ass donuts. You sell them only by the dozen. If you have a million donuts and everyone is paying for them, you’re bakery will be a success. However, you now let people buy one donut at a time if they want. You now are making only 250,000 donuts, but your warehouse of donuts keeps being broken into by some really big donut fans who also buy ten times more donuts than people who don’t steal donuts. Guess what Mr. Baker, you’re hosed. Now, think about it, who are you going to blame? The customers who are buying less donuts or the customers who are buying lots of donuts, but then stealing even more of your yummy treats? Both are at fault, but I would argue that since the theft is up while consumption is down dramatically, it’s the thieves that have the greater impact. Get your Freakanomics book out for that one Econ majors! All in all, if both continue, that bakery’s going to have a “for lease” sign plastered in the window mighty quick.
Are the Norwegians lying? Nope. I think it’s probably true that people who steal music are likely to buy music. Especially 15-20 year olds. These kids probably get iTunes gift cards at every holiday, birthday or graduation. They are in the formative years of their music acquisition. They probably do spend money from their summer jobs on music. The truth is, however, they steal even more. Consider these kids music addicts acting like a drug addict. When you got money to pay for it, you pony up. Even if you have money to pay for it, sometimes you don’t have to. When you don’t have money for it, you still gotta get your fix and, “what’s that? Is that a bile pile of my drug of choice over there? Don’t mind if I do…”
This was actually a much more interesting study than the Swedish one. Certainly it was much more believable, but sadly, less conclusive. The idea that illegal music downloading is not at the heart of the demise of the music industry is preposterous. The stats, once again do not lie. Music sales are down dramatically. Illegal file sharing is up dramatically. Let’s not patronize piracy and the thieves by saying that they are also good for business. That’s just plain stupid. They’ve ripped the heart out of the business. Any out-of- business donut shop can tell you that.